U.S. Trade Flows

Crude Oil and Product Mix

Crude oil dominates U.S. imports just as it dominates world trade and for much the same reasons.  Therefore, all of the U.S. leading suppliers are major crude producers.  Imports of crude oil, having grown to replace declining domestic production and to meet growing demand, now account for around 80 percent of the total.  Product import volumes have stayed relatively stable.

In spite of the seeming stability in product imports, there have been significant structural shifts over the last couple of decades in the mix of products that the United States imports.  Residual fuel oil, for instance, formerly accounted for the majority of all product imports, but its share has shriveled into insignificance as utilities and industrial users have switched to other fuels, particularly nuclear and natural gas.   In its place, the United States now imports a much higher proportion of petroleum products that are reprocessed or blended by the oil industry, such as the unfinished gasoline and gasoline blending components that are central to reformulated gasoline supply.

Canada is the one country that delivers oil to the United States by pipeline.  Only its relatively new offshore Eastern Canadian production, from fields like Hibernia, depends on tankers.  The vast majority of Canada’s crudes are landlocked and rely almost exclusively on trunk-lines from Western Canada that tie into the U.S. transcontinental network to reach their main export markets, which lie all across the Northern Tier of the United States.  As domestic production has declined, these Canadian crudes have had a greater reach into the United States.

U.S. Exports

Since the United States is the world’s largest importer, it may seem surprising that it also exports around 1 million barrels a day of oil, predominantly petroleum products.  Due to various logistical, regulatory, and quality considerations, it turns out that exporting some barrels and replacing them with additional imports is the most economic way to meet the market’s needs.  For example, the Gulf Coast may export lower quality gasoline to Latin America while the East Coast imports higher quality gasolines from Europe

U.S. Regional Trade

There are significant differences between different parts of the United States in terms of their involvement in and dependence on international trade.  Most of these differences are the direct result of the uneven distribution of both production and refining across the United States.  The East Coast imports over half of all the products that come to the United States, because it is the largest consuming area in the United States but, for historical reasons, it has only enough capacity to meet around 1/3 of those needs from its own refining.  It fills the product gap with supplies from other parts of the United States, particularly the Gulf Coast, and with imports.  Its limited volume of refining capacity also keeps it a distant third as a crude importer.  However, because its local production is so insignificant, its crude import dependency is the highest of all, at almost 100 percent. 

The only other region that imports significant amounts of products is the Gulf Coast.   Its focus is not, like the East Coast's, on products that can be supplied directly to the consumer, but on refinery feedstocks and blendstocks, to support its role as the main U.S. refining and petrochemical center.  That role, plus the need for all the Midwest’s non-Canadian crude imports to move through the Gulf Coast’s ports and pipelines too, has also led to the Gulf Coast being by far the most important crude oil importing region in the United States, accounting for nearly two-thirds of the total.

The trade among regions of the United States is focused on the eastern half of the country.  The Midwest and East Coast account for 90 percent of the inter-regional flow, the flow between Petroleum Administration for Defense Districts.  The Gulf Coast is by far the largest supplier, accounting for more than 80% of the inter-PADD flow.   In contrast, the Rockies and the West Coast are isolated, in petroleum logistics terms, from the rest of the country.  The easy flow of petroleum from the Gulf Coast to the Midwest and the East Coast mean that incremental supply is more readily available to those markets in the event of a demand surge or supply drop.  In contrast, the West Coast, and the California market in particular, cannot so readily attract incremental supplies.  Thus, the California refinery outages that occurred in the Spring of 1999, resulted in a large price increase as market players scrambled for additional supply, none of which was available close at hand, or cheaply.  The California market's isolation is more than just geographic: the State imposes unique and stringent quality restrictions on both its gasoline and its off-highway diesel, making what otherwise might be available to augment California product supplies unsuitable. 

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